Hang Seng Index and Nikkei 225 Rise on Fed Rate Cut Bets and PBoC Liquidity Moves

US Equities Advance on Fed Rate Cut Bets

On Wednesday, October 8, US Equity Markets extended their gains from Tuesday.

The FOMC Meeting Minutes offered insights into the Fed’s views on interest rates. The Minutes highlighted that a 50-basis point November Fed rate cut should not signal a more aggressive Fed rate path. However, there were no surprises to force investors to write off a November Fed rate cut, driving demand for riskier assets.

The Dow gained 1.03%, while the Nasdaq Composite Index and the S&P 500 advanced by 0.60% and 0.71%, respectively.

Expert Views on the FOMC Meeting Minutes and Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the Minutes, stating,

“Minutes from last Fed meeting show almost all seeing inflation risks diminishing while risks to emp have increased & showed a “substantial majority” supporting 0.5% cut but “some” preferring 0.25%. This along with strong Sept payrolls and recent Fedspeak point to Nov being -0.25%”

Japan’s Producer Prices Rise

On Thursday, October 10, Japan’s producer prices increased by 2.8% year-on-year in September, up from 2.6% in August. Economists consider producer prices a leading indicator for consumer price inflation. The upswing could signal demand-driven inflation, possibly supporting a Q4 2024 Bank of Japan rate hike.

Nevertheless, the USD/JPY held onto the 149 level following Wednesday’s 0.75% gains. The USD/JPY was down 0.11% to 149.130 in the morning session.

Aussie Consumer Inflation Expectations Signal RBA Rate Cut

In contrast to the Bank of Japan, Aussie economic indicators likely raised expectations of a Q4 2024 RBA rate cut. Consumer inflation expectations dropped from 4.4% in September to 4.0% in October. Consumers could delay spending plans if they anticipate falling prices, which may dampen demand-driven inflation.

A more dovish RBA rate path could drive buyer demand for rate-sensitive ASX 200-list stocks.

People’s Bank of China Delivers Equity Market Support

The People’s Bank of China (PBoC) moved to support the Mainland equity markets on Thursday. CN Wire reported:

“PBOC sets up 500 billion Yuan of SFISF (Security, Funds, and Insurance Companies swap Facility) for the first time, to provide liquidity to equity-holding financial Institutions.”

The facility aims to support the stock market by enabling financial institutions to pledge bonds, stock ETFs, and CSI 300 stocks to get liquidity to access funds and increase stock holdings.

Hang Seng Index and Mainland China Equities Steady

In Asia, the Hang Seng Index rallied 3.02% on Thursday morning. PBoC moves to steady the Mainland China markets, and overnight gains in the US drove demand for HK-listed stocks. Both the real estate and tech sectors were recovering from Wednesday’s losses.

The Hang Seng Mainland Properties Index (HMPI) rallied by 3.69%, while the Hang Seng Tech Index (HSTECH) advanced by 2.43 %. Among real estate stocks, Shimao Group Holdings Ltd (0813) gained by 2.99%, while Longfor Group Holdings Ltd. (0960) surged by 7.34%.

Mainland China’s equity markets responded positively to the PBoC’s measures. The CSI 300 and Shanghai SEC Composite saw morning gains of 0.29% and 0.42%, respectively.

Nikkei Index Advances as Yen Returns to 149

Meanwhile, the Nikkei 225 was up by 0.24% on Thursday morning, as the USD/JPY pair retook the 149 level, fueling demand for Nikkei 225-listed export stocks. Nissan Motor Corp. (7201) advanced by 1.19%

Bets on a November Fed rate cut continued to drive demand for tech stocks, with Softbank Group Corp. (9984) rallied 3.01%.

ASX 200 Mirrors Wall Street Gains

On Thursday, the ASX 200 Index advanced by 0.58% in the morning session. Banking and mining stocks were among the front runners.

Mining giants Fortescue Ltd (FMG) and Rio Tinto Ltd. (RIO) advanced by 2.00% and 0.44%, respectively. Iron ore spot price price gains fueled demand for mining stocks.

M&A activity also drew investor interest. On Wednesday, Rio Tinto Ltd. announced a $6.7 billion deal to acquire Arcadium Lithium (LTM). According to the announcement, the acquisition represents a 90% premium to Arcadium’s October 4 closing price of $3.08. This morning, Arcadium Lithium was up 39%.

Expectations of a 25-basis point Fed rate cut continued to fuel the appetite for high-yielding Aussie bank stocks. ANZ (ANZ) and Commonwealth Bank of Australia (CBA) saw gains of 1.08% and 0.77%, respectively.

Higher gold and oil prices in the morning session drove demand for gold and oil-related stocks. Both commodities retreated on Wednesday.

Looking Ahead

Investors should remain alert, focusing on the central banks and the Middle East. Closely monitor news wires, real-time data, and expert commentary to adjust your trading strategies accordingly. Stay updated with the latest news and analysis to effectively manage positions across the Asian equity markets.